InCorporating a Limo Business

I don't think this has been answered anywhere on this website. I understand the larger limo businesses usually incorporate there business name. However, do you recommend it to be done with someone who's starting out as well? I understand there are tax benefits, etc but if someone is starting out part time, they can also carry over there losses towards there personal income? Any suggestions? Are there other reasons for incorporating in this industry? Thanks for any feedback.

Ever heard of lawsuits,I may be wrong BUT if you are incorporated and get sued they cannot toch your personal assets...
JHJ in Pittsburgh is your man to answer this..over to you James.

Ever heard of lawsuits,I may be wrong BUT if you are incorporated and get sued they cannot touch your personal assets...
JHJ in Pittsburgh is your man to answer this..over to you James.

I thought that's what insurance was for. I'm assuming that if someone really wanted to, they can sue you personally or while incorporated if they have a good case against you.

First, no insurance will prevent you from being sued. Any type of business entity literally wears a target on them for lawsuits. These are the days we’re living (and doing business) in.

You don’t incorporate your business name (as far as your business name however, you would need to file a fictitious business name statement); you incorporate the business itself. A business that is formed as a corporation is a separate and distinct legal entity. Bank accounts, vendor accounts, equipment, rent, utilities, etc. can all be (and certainly should be) under the corporation.

Some may argue this, but I would suggest that to be a corporation lends a certain ‘legitimacy” to your business. But let me say that there are some very successful businesses of considerable size, scope and worth that operate either as partnerships or and sole proprietorships. Corporate clients in a vendor/supplier relationship would probably prefer dealing with corporations if they had the choice, but that’s not been conclusively proven. The sole proprietorship is the very icon of the American concept of small businessman. But I digress... you asked about corporations.

Invariably, the corporation may have more opportunities to raise capital, financing and investors since the loss of personal assets for potential investors is guarded against. Unlike a sole proprietorship or partnership, a corporation keeps on going on if the owner or one of the owners die. A Corporation can be transferred with fewer hassles than a sole proprietorship. And the advantage most folks want, the personal assets of the stockholders (owners) can’t be touched. So if the company goes broke, and the loot’s all gone, that’s the end of it. You do realize there is a catch, right? So let’s turn to some disadvantages that need consideration.

Forming a corporation does require money. Even if you don’t use an attorney there are filing fees, and whatever state(s) you’ll conduct business in will want theirs. While it shouldn’t be considered difficult to form a corporation, it does require a lot of responsibility and proper setup. More than anything else, the assets of the corporation and the personal assets of the stockholders must be separately maintained. Corporation record keeping cannot be taken lightly. And there are meetings for which you’ll need to record the minutes... think of these things especially if you will be the only stockholder! Now, about those personal assets of yours. They’re still safe, but only if you run the corporation properly. I’m sure many of us can relate stories of someone who had their world shot out from under them by way of a “piercing of the ‘corporate veil’.” This “corporate veil” is the invisible force field that keeps everyone out of your personal assets should the corporation fail and go broke. But if you as a stockholder personally guarantee a debt for the corporation, look out! So it follows that a corporation also should be adequately capitalized to stand on its own. If you don’t pay those taxes (including unemployment taxes on yourself) you’d better yell Geronimo because you may be going down. No minutes of the meeting, or no meeting at all? Watch out for the Whammy! You have caused your “corporate veil” to be pierced. You’ve got holes in it, and they can come and get you and your personal assets.

I mentioned tax a little while ago... Did you realize also that as a stockholder of a corporation you are subject to double taxation? The corporation pays tax on its income, then distributes profits to you as a stockholder which you in turn must pay tax on. But, it is possible to elect a Subchapter-S filing which allows the corporation to pass the profit through directly to the stockholder to pay their individual tax on. It’s simple, but a little involved in that it is relative to your tax situation.

That all said, I guess I should throw in an advice that consulting with your bookkeeper/accountant would be a good idea, as well as consulting an attorney. They should all be able to evaluate your goals and help you decide which course of action is best for you.

That’s pretty much the way I see it. Anyone else want to weigh in?

Karl Jones

Karl,

Thanks for that detailed reply! It answered every one of my questions. Greatly appreciated!!